The following correction was printed in the Guardian's Corrections and clarifications column, Monday 27 September 2010

Contrary to this story, Cairn did not claim to have found oil or "oil-bearing sands" at its T8-1 well. What Cairn formally announced on 24 August, as our second story did go on to say, was "the discovery of gas in thin sands … indicative of an active hydrocarbon system"; its deputy chief executive said that although the main gas in these muddy sands was biogenic gas, analysis also showed some thermogenic gas – a type that can be associated with oil, or, he cautioned, not associated at all. (A month later, on 21 September, Cairn announced that it had found evidence of oil at a second drill site, Alpha-1S1, 60km from the first.)

Cairn Energy has confirmed that it has discovered gas and oil-bearing sands off the coast of Greenland in a move that will heighten fears of environmental campaigners that the Arctic is set to become the scene of the world's last great dash for oil.

Greenpeace's ship Esperanza is already in the area, protesting against the actions of Cairn Energy, the first company permitted to drill for oil in the sensitive environment. Earlier this week it was challenged by a Danish warship whose captain is enforcing a 500-metre exclusion zone around the two wells.

Environmental campaigners fear that drilling in the previously untouched Arctic area raises the risk of an environmental disaster on the scale of the Deepwater Horizon spill in the Gulf of Mexico. The oil industry, however, will welcome Cairn Energy's announcement as confirming their suspicions that the Arctic harbours one of the world's last remaining major reserves of oil.

In a statement accompanying its half-year results, Cairn Energy said one of its two exploration wells in Baffin Bay, which is of a similar scale to the North Sea, has found "gas in thin sands" which "is indicative of an active hydrocarbon system". The well in question – T8-1 – has not yet reached its target depth. Cairn Energy has plans for four wells in its current drilling programme. The company is also carrying out 10,000 kilometres-worth of seismic surveying.

"I am encouraged that we have early indications of a working hydrocarbon system with our first well in Greenland," said chief executive Sir Bill Gammell, "confirming our belief in the exploration potential. We look forward to assessing the results of the remainder of the 2010 drilling programme."

Cairn announced the discovery alongside news that revenues in the six months to end June rose 311% to $333m (£216m) and the company swung from a $15m loss last year to a profit of $94m.